Shared services is different from the model of outsourcing, which is where an external third party is paid to provide a service that was previously internal to the buying organization, typically leading to redundancies and re-organization.
There is an ongoing debate about the advantages of shared services over outsourcing.
The former is ‘obvious': if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs.
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This argument assumes that efficiencies follow from specialization and standardization – resulting in the creation of ‘front' and ‘back' offices.
The typical method is to simplify, standardize and then centralize, using an IT 'solution' as the means.
Although the amount of KPIs chosen differs greatly it is generally accepted that fewer than 10 carefully chosen KPIs will deliver the best results.
Organizations do attempt to define benchmarks for processes and business operations.
Benchmarking is the comparison of the service provision usually against best in class.
The measurement occurs by using agreed key performance indicators (KPIs).
To alleviate this problem, server virtualization may be used to mask the details of server resources from users while optimizing resource sharing.
Another approach to server consolidation is the use of blade servers to maximize the efficient use of space.
The management thinker and inventor of The Vanguard Method, Professor John Seddon claims that shared service projects based on attempts to achieve 'economies of scale' are a mix of the plausibly obvious and a little hard data, brought together to produce two broad assertions, for which there is little hard factual evidence.